Massachusetts Governor Finalizes 2010 Tax-Free Holiday

Governor Deval Patrick signed the much-anticipated 2010 Massachusetts tax-free holiday bill this week. His signature comes less tan a week after the Massachusetts House and Senate passed a bill to bring back tax-free shopping weekend in August 2010. The tax-free shopping weekend is part of a larger economic development bill which focuses on "middle class housing" in Western Massachusetts cities including Springfield, Holyoke and Chicopee, according to The Reupblican. The Massachusetts economic bill also creates tax breaks for manufacturing jobs.

Governor Deval Patrick Approves Tax-Free Holiday; It's an Election Year

In 2009 the tax-free holiday was not extended to Massachusetts residents, is scheduled to return the week of August 14 and August 15, 2010. In 2009 Massachusetts residents were not allotted the tax-free August shopping holiday which they had enjoyed for the previous five years. In 2009 Governor Patrick could afford to skip the tax-free holiday and raise taxes instead. Because 2010 is an election year, it makes sense for him to try to appease an economically dissatisfied electorate with a bone, in the form of a tax-free weekend.

Why Was There No Tax Holiday in 2009?

Last year was the year without a tax-holiday due to the state's budget deficit. Instead of giving tax-payers their annual August tax break, which they had enjoyed for five consecutive years, Governor Deval Patrick and Massachusetts lawmakers gifted Massachusetts residents with a sales tax hike, from 5 percent to 6.25%.

2010 Massachusetts Revenues

With the increased sales tax rate, revenues up by $240 million, the state of Massachusetts can afford to extend a tax-free weekend to residents. Revenues for the month of June in the Commonwealth were $2.031 billion according to the Massachusetts Revenue Commissioner. Navjeet K. Bal announced the revenues were 13.4% higher than last June.

In reality, the tax increase generated an extra $79 million in the month of June according to the Massachusetts Department of Revenue. The revenue increase has not done much to boost consumer confidence in Massachusetts, which according to Mass Insight, plummeted by 19 percent.

The tax-free holiday will provide at least some reprieve for Massachusetts residents who are not feeling confident about the economy, despite the state's increased revenues derived through sales tax, including June's $10.7 million generated through the tax on alcoholic beverages.

Connecticut's Tax Free Holiday

The tax-free weekend in Massachusetts is more generous than Connecticut's 2010 Sales Tax Holiday, or the "exclusion week." Connecticut residents regularly pay a six percent sales tax, including a clothing tax.

New Hampshire

New Hampshire residents enjoy tax-free shopping year-round and traveling to New Hampshire is an option for some Massachusetts residents living near the state borders, traveling to New Hampshire for shopping is not a viable option for all Massachusetts residents.

Sources

"Sales tax holiday, manufacturing tax breaks highlight Massachusetts economic development bill," http://www.masslive.com/news/index.ssf/2010/08/sales_tax_holiday_manufacturin.html

"TIR 10-10: The 2010 Massachusetts Sales Tax Holiday Weekend," http://www.mass.gov/?pageID=dorterminal&L=7&L0=Home&L1=Businesses&L2=Help+%26+Resources&L3=Legal+Library&L4=Technical+Information+Releases&L5=TIRs+-+By+Year(s)&L6=2010+Releases&sid=Ador&b=terminalcontent&f=dor_rul_reg_tir_tir_10_10&csid=Ador